Economic Globalization, Informality and Informal Employment: The African Perspective

Abstract

Economic Globalization has a twofold impact on working individuals in developing economies – a surge in informal economic activities and fragmentation of work on one hand and expansion of opportunities, on the other. Economic globalization also implies increasing helplessness in the face of developments in anonymous markets with incalculable consequences, erupting in cross-border division of labor and production. This trend is, and will remain, irreversible. We see globalization as a process that induces countries to embrace greater trade and financial integration. While some businesses in the informal sector have succeeded in finding new markets for their commodities and services, others have completely lost their jobs and industries have seen their profits decline and working conditions deteriorate. This paper evaluates cross-border trade spillover, resulting in a shift from secure forms of employment to insecure forms of self-employment, and informal sector employment transformations. We discover that, cross border trade and financial openness have a positive association with economic ‘informality’ growth and a negative association with labor employment in the informal services industry. The paper contributes to export promotion and import substitution industrialization policy in developing economies. Such policy will provide a safety buffer for the otherwise fragile retail industries, strengthen social protection, improve worker rights and create sustainable employment for informal sector workers.